Increasing grey-zone coercion from the People’s Republic of China (PRC) in the Indo-Pacific and uncertainty around the United States’ commitment to regional stability make it imperative for US allies to demonstrate initiative in regional crises, a new report by the United States Studies Centre (USSC) at the University of Sydney finds.
In September 2025, the USSC convened its annual strategy simulation, bringing together senior experts from Australia, Japan, and the United States (AJUS) to navigate a hypothetical PRC grey-zone campaign in the Indo-Pacific. The outcomes of the exercise are shared in a new report, Grey-zone games: Lessons from the 2025 Australia, Japan and United States simulation, authored by USSC CEO Dr Michael J. Green, USSC Senior Defence Adviser Prof. Peter J. Dean, Sasakawa Peace Foundation Executive Director Prof. Nobukatsu Kanehara and others.
“Grey-zone threats in the Indo-Pacific are only increasing, but our most recent simulation found this was complicated and compounded by uncertainty around US commitment,” said Dr Green. “This simulation tested the bounds of current trilateral cooperation and found deterrence improved when Australia and Japan demonstrated initiative within a coordinated AJUS response.”
The report explores the challenges of countering a PRC ‘Small Island Strategy’ where aggressive military posturing and economic coercion were used to assert control over maritime features. The simulation found that while the AJUS military responses were challenged by PRC operational advantages, and AJUS economic responses were constrained by supply chain vulnerabilities, informational and diplomatic tools proved effective in isolating Beijing. Crucially, the simulation revealed that uncertainty surrounding US interest in the region prompted Australian and Japanese teams to proactively drive responses to PRC incursions, demonstrating burden sharing and incentivising US engagement.
“This simulation made it clear that deterrence in the Indo-Pacific needs more than military power,” Prof. Peter Dean noted. “It relies on trust between partners so that pre-planned coordination across diplomacy, intelligence, and information systems can be swiftly and decisively enacted when crises emerge.”
- Grey-zone games: Lessons from the 2025 Australia, Japan and United States simulation is now available to view or download.
The United States Studies Centre would like to thank the Sasakawa Peace Foundation for their generous support of this activity.